Faculty of Commerce, Law and Management (ETDs)
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Item Crypto assets as a financial service for VAT: An analysis(University of the Witwatersrand, Johannesburg, 2024) Matabane, Lesego‘Crypto assets’ is an umbrella term referring to digital financial assets (such as Bitcoin) founded on distributed ledger technology. The South African Revenue Service (SARS) defines crypto assets as a digital representation of value that are not issued by a central bank; thus, these assets are traded, transferred and stored electronically by individuals and entities – both natural and legal – for purposes such as payment, investment and various forms of utility (Ukwueze, 2021). The underlying technology behind crypto assets incorporates cryptography techniques (SARS, 2023). Since their inception in 2009, crypto assets have drawn increasing attention from regulators (OECD, 2020), and cryptocurrency has emerged as a novel form of payment in recent years. This development is fuelled by the flaws in the presently dominant payment method of fiat currency, which include the centralised structure of fiat currency, high transaction costs, the time it takes to process payments (especially for foreign transactions) and the need for more confidence in the institutions managing the current monetary systems (Hamukuaya, 2021). This report analyses whether a crypto asset can be classified as a financial service according to the South African Value-Added Tax Act, No. 89 of 1991 (VAT Act) legislation through an assessment of the features of crypto assets (also known as cryptocurrencies) and a comparison of the classification of crypto assets by South Africa to that by other countries. According to the study's findings, South Africa has adopted the strictest approach, excluding "the issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency" by categorising cryptocurrency as financial services under Section 2 of the VAT Act. The analysis also reveals that South Africa's approach to classifying cryptocurrency for VAT purposes is similar to that of other countries. Therefore, this research suggests that South Africa should broaden the investigation into categories such as the source of cryptocurrencies, nature of supply and place of supply transactions that include exchanging cryptocurrency assets for fiat money or other assets, as well as utility tokens when they are used. These suggestions might serve as further evidence that consensus about the VAT consequences of transactions involving cryptocurrency assets is still pending.Item Understanding the attributes and characteristics of cryptocurrency ownership: A South African study(University of the Witwatersrand, Johannesburg, 2023) Jetha, Hesita; Brahmbhatt, YogeshBackground: This study investigates the attributes and characteristics of cryptocurrency investors in South Africa and the attributes of cryptocurrencies that drive investment or non-investment. Objectives: This study aims to explore the demographics and sociodemographic factors of cryptocurrency investors as well as the emotions and biases that impact investors’ decisions to invest in cryptocurrency in order to investigate the individuals who invest in cryptocurrency and the reasons why they invest in cryptocurrency. Methods: A sample of 298 South African residents aged 18 and above completed an online survey that assessed their cryptocurrency ownership, demographics, motives for investment, attitudes toward cryptocurrency, and other relevant variables. Descriptive statistics and logistic regression analyses were conducted to examine the relationship between these variables. Results: The results showed that cryptocurrency investors are more likely to be males, under the age of 35, who are currently employed and have higher income levels. The individuals’ main motives for investing in cryptocurrency were the opportunity to obtain high returns and the new technology that cryptocurrency encompasses. In addition, the results showed that attitudes toward cryptocurrencies significantly impact their decision to invest in cryptocurrency. Conclusion: These findings suggest that more information relating to the risks involved in cryptocurrency investment as well as the potential of cryptocurrency to be used as a medium of exchange is required among individuals to protect themselves against losses and simultaneously allow them to take advantage of the lucrative benefits that cryptocurrencies offer. Furthermore, policymakers, the government, and businesses require more information regarding cryptocurrencies in order to have the necessary policies in place and to stay competitiveItem Reconsidering the debate relating to the proposals for the regulation of cryptocurrencies in South Africa(University of the Witwatersrand, Johannesburg, 2023) De Sousa, Michaella Alexandrine; Kawadza, HebertWords cannot express my gratitude to my supervisor, Professor Herbert Kawadza for his vital patience and feedback. His guidance and vast knowledge in commercial and banking law was the main reason I hoped to have him as my supervisor for the completion of my LLM Research Report, without him I would still be lost in my drafting. I am extremely grateful for the guidance and encouragement of my two very close colleagues and mentors, Daven Dass and Alicia Raymond, their encouragement and conversation pushed me through writer’s block and self-doubt. I certainly could not have undertaken this journey without my strong support system and the most important people in my life, my father, Rui de Sousa; my sister, Claudia de Sousa; and partner, Nicholas Elliott. Their belief in me and ongoing patience in reading and rereading every iteration of this LLM Research Report will always be appreciated. This degree would never have been completed without them. As the adage goes, I am because they are, and I will always be indebted to them. Lastly, this LLM degree is for my late mother, Carla de Sousa, without her guidance and belief I would not be where I am now, and I will always be grateful to herItem The tax implications of crypto assets in South Africa(University of the Witwatersrand, Johannesburg, 2023) Mistry, Riya; Kolitz, MaeveThe primary objective of this research report is to examine the current South African legislation and guidance on the taxation of crypto asset transactions. More specifically, this research report will focus on identifying any inadequacies in the legislation and guidance issued by the South African Revenue Service (SARS) and provide suggested solutions to these inadequacies. In 2018, SARS issued a media release (South African Revenue Service [SARS], 2018) to clarify its stance on the tax treatment of crypto assets and issued a list of frequently asked questions on crypto assets which was revised in 2021 (SARS, 2021a). More recently, The Commissioner of SARS, Edward Kieswetter, confirmed that any undisclosed holdings of crypto assets would be a prioritised area of focus for the tax revenue authority in the 2021 year of assessment (Tax Consulting South Africa, 2021). This indicated that SARS would be focusing more on the taxation and verification of crypto asset transactions in the near future. In August 2021, SARS provided further guidance on the taxation of crypto assets on their website. According to this guidance, normal income tax rules apply to crypto assets, and affected taxpayers must declare profits and losses from crypto assets as part of their taxable income. Taxpayers are further required to declare all taxable income related to crypto assets during the tax year in which it was earned or accrued; if not, the taxpayer will be subject to penalties and interest (SARS, 2021b). The findings of this research report are that the acquisition, exchange, and disposal of crypto assets represent separate transactions with clearly identifiable income tax consequences in South Africa. The income tax consequences are dependent on whether the accrual and the amount are of a capital or revenue nature. This research report seeks to identify inadequacies in the legislation and guidance issued by SARS on the taxation of crypto assets. This will be achieved by conducting a comparative analysis between the legislation and guidance issued by the Australian Taxation Office (ATO) in Australia, the South African Revenue Service (SARS) in SouthItem The tax implications of crypto assets as per the income tax act 58 of 1962 from a South African perspective(University of the Witwatersrand, Johannesburg, 2022) Marek, AndrzejCrypto assets have characteristics akin to those of virtual and financial products. They are currently utilised in payment transactions, financial instruments, investments, and corporate coupon bonds1 (The World Bank, 2017; HM Treasury et al., 2018; FCA 2021). These types of assets can be thought of as intangible digital assets whose creation, sale, or transfer are controlled by cryptographic technology and are shared electronically via a distributed ledger (Bartolucci & Kirilenko, 2020). Crypto assets are purchased for different reasons, such as speculative investing (a perceived increased future value), as a medium of exchange in facilitating transactions for goods and/or services, or for access to specific products, services, and utilities (Intergovernmental Fintech Working Group, 2021). Guidance on crypto assets issued by the Financial Conduct Authority of the United Kingdom (Financial Conduct Authority of the United Kingdom, 2019) categorises crypto assets into three different classes, namely Utility, Security and Exchange Tokens. The report aims to gain a comprehensive understanding of the commercial and economic substance of crypto assets and use this as a guide on how crypto assets should be taxed from a South African perspective. Further to this, the report analyses the separate classes of crypto assets available to taxpayers, namely, asset backed tokens, utility tokens and security tokens, and provides insight into the tax treatment of these specific classes. South Africa has adopted a stance in which the tax implications are dependent on the intention of the taxpayer. If the taxpayer regularly sells crypto assets, the presumption is that the taxpayer’s intention is to make a trading profit and taxable as a revenue profit (Haupt, 2022), whereas, if the taxpayer neither sells, exchanges nor spends the crypto asset, the indication is that taxpayer is holding it as a store of value and therefore as a capital asset (Haupt, 2022) and this is subject to Capital Gains TaxItem Testing the adaptive efficiency of bitcoin(2022) Maredi, MaromoThis research aims to investigate an alternative view of market dynamics referred to as the Adaptive Markets Hypothesis which posits that an asset’s efficiency will change over time. As such, this research will test whether Bitcoin is time-varyingly efficient. This will be accomplished in three stages. Firstly, whether Bitcoin returns follow a random walk/martingale will be investigated. If they do, that means that they cannot be predicted, thereby providing evidence of the weak-form market efficiency. If they do not follow a random walk, however, the second phase of the investigation turns to whether they can be modelled. The first attempt models the current Bitcoin return as a function of its own lagged values, which is predicated the idea of all relevant information being reflected in historical returns. The inadequacy of this model in its description of the returns generating process, provides evidence that there is private information that historical returns do not reflect which impacts returns. To account for this, the returns generating process is thus modelled using both historical returns and exogenous lagged variables without need to specify the model’s functional form. If the model performs better in some periods than in others, it can be inferred thus that Bitcoin is timevaryingly efficient.Item Testing the adaptive efficiency of bitcoin(2022) Maredi, MaromoThis research aims to investigate an alternative view of market dynamics referred to as the Adaptive Markets Hypothesis which posits that an asset’s efficiency will change over time. As such, this research will test whether Bitcoin is time-varyingly efficient. This will be accomplished in three stages. Firstly, whether Bitcoin returns follow a random walk/martingale will be investigated. If they do, that means that they cannot be predicted, thereby providing evidence of the weak-form market efficiency. If they do not follow a random walk, however, the second phase of the investigation turns to whether they can be modelled. The first attempt models the current Bitcoin return as a function of its own lagged values, which is predicated the idea of all relevant information being reflected in historical returns. The inadequacy of this model in its description of the returns generating process, provides evidence that there is private information that historical returns do not reflect which impacts returns. To account for this, the returns generating process is thus modelled using both historical returns and exogenous lagged variables without need to specify the model’s functional form. If the model performs better in some periods than in others, it can be inferred thus that Bitcoin is timevaryingly efficient.